As this new year kicks off, we thought we’d look ahead at what we think may be the big stories of 2014 at MichiganGreenLaw.com, in no particular order:

•Wetlands – Will EPA and the Army Corps of Engineers finalize guidance regarding the scope of waters regulated under the Clean Water Act? Or will there be new rules or even new legislation? There are members of Congress on both sides of this issue and it is unclear which way this issue will go, although the federal trend is to try and govern as many bodies of water no matter what. This fall, EPA published a draft connectivity analysis which many view as a prelude to new regulations attempting to vest the federal government with broad jurisdictional over virtually every drop of water in the country. It will be interesting if the federal government tries to delete the “significant” portion of the Rapanos “significant nexus” test.

• Hydraulic Fracturing – this continues to be a lightning rod for controversy. At the end of 2013, the Associated Press reported on both alleged and confirmed environmental problems in 4 states including Ohio and Pennsylvania. Michigan looks to beef up its oversight of, and its communications regarding, fracking proposals and operations. The University of Michigan continues to study the technical issues. The focus on this issue seems to be shifting toward the volumes of water used in fracturing and monitoring withdrawals used for oil and gas production. It appears that the 2012 U.S. Department of the Interior draft rules for fracking on federal and Indian lands remain draft – will they ever be finalized?

• MDEQ Brownfield Process Streamlining. MDEQ has promised to convene a short-term task force to work on harmonizing, improving and streamlining the various funding mechanisms currently used to incentivize brownfield redevelopment. This can only be a plus.

• MDEQ Cleanup Rules – as required by the Legislature, MDEQ proposed adopting its previously informal standards as formal cleanup rules late in 2013. The MDEQ will continue to work on improving and in some cases broadening its cleanup rules and criteria – we expect more work on the assumptions of exposure underpinning the standards, more work on vapor intrusion standards and more work on standards and processes applicable to groundwater venting into surface waters. MDEQ also continues to discuss more rules and standards defining what constitutes “due care” which is an issue for property owners who are not liable pursuant to a BEA and for other reasons.

• Keystone Pipeline. As we predicted, President Obama and Congress continue to be locked in a politically charged dispute over the Keystone XL pipeline, a proposed 1,700-mile oil pipeline from Canada to Texas. The President deferred it and lately the pundits have argued that pipelines are safer than transporting shale oil by truck and train.

• Energy Policy In Michigan – at the end of the year, and after a year of “listening” sessions and collecting information, Governor Snyder indicated that he intends to seek legislation improving Michigan’s energy policies, focusing on lowering costs, improving reliability and minimizing environmental impacts. This will be interesting.

For the last 20 years, we have seen the innovative and aggressive Michigan brownfield liability and redevelopment laws move redevelopments forward. While some of these projects have been big, all of them have been what I like to characterize as “low hanging fruit.” This makes sense because, for all the incentives available, at the end of the day, if you rehab a building that no one wants to occupy, the incentives available won’t make the difference. While not easy to redevelop, these sites have been redeveloped while other major environmental sites (either very large, very contaminated or in less desireable locations) continued to lay fallow.

So, it is logical that downtown Detroit and areas of Ann Arbor and Grand Rapids and Lansing have seen major brownfield redevelopment pushes and that smaller projects in outer ring suburbs with sound economies have also benefited from the State’s brownfield programs.

But now, we have some major projects that are not “low hanging fruit.” The Packard Plant is paid for and soon will be owned by a Brazilian developer with big plans. He calls it the “best opportunity in the world” and he sounds serious. Work on the long-stalled Uniroyal site is reportedly moving forward. DTE recently sold its Marysville Michigan Plant to a St. Louis developer with experience in Brownfields. There has been talk for years about Detroit looking at Turin Italy as a model for post-industrial redevelopment and the TV show, Morning Joe recently came to Detroit to tout its urban revival. I saw this article about the creative redevelopment of a Spanish cement plant, and now I wonder whether we will see this sort of investment and creativity in Detroit and southeast Michigan brownfields which are not the easiest of sites to redevelop. If so, it will be a very exciting time in Michigan. Michigan clearly has the supply; now it is time to see if there is sufficient demand.

Despite a recent piece in the Wall Street Journal discussing Europe’s experience with higher cost, less dependable solar and wind power, the creativity of academia never ceases to amaze me. I recently came across an article about this publication, Environmental Science & Technology Letters and a paper in it about utilizing CO2 emissions from power plants in fluids, where the CO2 was split into positive and negative ions. The ions were then used to create a flow of electrons that could be captured by an electrode, creating electricity. While this proof-of-concept is not yet efficient (i.e., it uses more energy than it generates), the researchers believe that they may be able to turn that around and make it cost-effective. While this wouldn’t reduce CO2 emissions, it could double the amount of energy associated with the same emissions, effectively cutting CO2 emissions in half per kilowatt generated. If this works (and there’s no guarantee that it will), it would also enable us to continue to use the current grid system.

Just as interesting, and farther along, are the University of Michigan’s experiments, described here, with capturing energy from low flow water bodies. The concept of hydroelectric energy is not new but UM apparently thinks that they may have found an efficiency that others may have missed allowing energy to be generated without dams and using natural flow rates.

Whether these technologies will turn out to be cost-effective remains to be seen but the ingenuity of mankind certainly gives me hope that we can protect the planet, be efficient and not have to become luddites.

As regular MichiganGreenLaw readers know, about 18 months ago, we added insulation to our home. While three years of data (one before, one of and one after) is not a big enough database, I spent time evaluating at the last three years of our DTE and Consumers Power invoices. What I learned is that our sense that our house was warmer in the winter and stayed cooler in the summer appears to be accurate. We saw a reduction in our usage and, while rates vary over time, it does appear that we are saving money. Now we find ourselves asking how long before this improvement pays for itself in savings?

This is the question that many businesses ask before making alternative energy investments – “How long before I recoup my investment?” Often, in the post-2007 era, businesses will insist on less than three years. Savvy investors know that there are many different methods used to analyze capital projects including net present value (NPV), internal rate of return (IRR), cash flow, profitability index (PI), and payback period.

The payback period method does not take into account the time value of money, the likely increase in costs of energy ($4.30 a gallon of gas, anyone?) and this method doesn’t consider cash inflows after the initial investment is recovered (except the recognition that it’s “all gravy” conclusion). The payback method’s biggest advantage is it is easy to apply and understand. However, as more and more authors are writing, this method is misleading and often unfair – as this author notes, no one asks for the payback on home amenities. In short, when making these investments, one must treat them as investments and, taking into account incentives, cash flow, cost of money, projected increases in the cost of energy, (not to mention the ability to market the greener approach or the societal value of a smaller carbon footprint) consider whether investing in greener equipment or processes is the best use for the company’s funds when compared to other investment opportunities. In many cases it may be the best investment, despite a longer than desired payback period.

So, the President said in January and in February, that climate change was one of his priorities and Congress could either work with him or he’d go it alone. What might the President do on sustainability and climate change without Congress ? Well, the Armed Forces are thinking about, talking about and planning for heightened conflicts caused by climate change and the challenges of waging war in a more intense environment.

What else might the President do? He could:

1. Impose heavier regulations on existing power plants, which reportedly account for 1/3 of U.S. greenhouse gas emissions.

2. Fully disapprove the Keystone XL Pipeline which many have said will result in few permanent jobs but perhaps the “dirtiest” oil available.

3. Attempt to regulate fracking – which will be difficult under the current Congressional regime.

Interestingly, without governmental involvement, the market itself appears to be pushing companies to assign monetary value to their impacts on the environment as part of an overall drive toward “sustainability.” Once you start measuring the impacts, it becomes easier for shareholders and the marketplace to drive less efficient companies toward efficiencies. So, perhaps the President doesn’t need to do anything.

As we race toward the end of the year, we thought we’d look back at what we thought were the big stories of 2012 on MichiganGreenLaw.com, in no particular order:

•Wetland Rules – EPA and the Army Corps of Engineers submitted final guidance to clarify the scope of waters regulated under the Clean Water Act to the Office of Management and Budget for federal interagency review. The EPA and the Corps have been the subject of “inquiries” from Congress, industry organizations, environmental groups, states and the public for rulemaking to further clarify the requirements of the Clean Water Act consistent with decisions of the Supreme Court. We continue to wait.

• Fracking– something that was little heard of before 2011, received a lot of notoriety as dueling reports were released and a flurry of rules and guidance including: an EPA rule to require well developers to institute “green completion” procedures which phases in over the next two years; EPA guidance when diesel fuel is included as a component of the fracking fluid used to free the trapped gas; and U.S. Department of the Interior draft rules for fracking on federal and Indian lands. The comment period closed in September and the Department recently announced that the rules would not be finalized until sometime in 2013. Finally, the petition drive to amend the State Constitution to ban the use of horizontal hydraulic fracturing fell flat and did not make the ballot. Given the voters’ response to Constitutional amendments and in particular, how Proposal 3 relating to the clean energy renewable portfolio standard failed, it seems likely that this would’ve failed too.

• MDEQ reorganization – the Director shook up the staff at the MDEQ. There was a CSI process intended to streamline the cleanup program and, in the last month, the Department’s cleanup division got a new chief, Bob Wagner, and the Governor signed legislation that was developed in part through the CSI process.

• Coal Ash – Hazardous Materials – while EPA had proposed rules to more heavily regulate ash from the combustion of coal, it ran into a political buzz saw and the regulations went nowhere. Luckily, the coal industry avoided the sorts of accidents that plagued them in 2011.

• Keystone Pipeline. As we predicted, President Obama and Congress started 2012 locked in a politically charged dispute over the Keystone XL pipeline, a proposed 1,700-mile oil pipeline from Canada to Texas. The President deferred it, catching some election year heat, and will likely have to deal with it again in 2013.

• Governor Snyder focuses on Environment/Energy– at year’s end, the Governor issued a policy statement on these two interrelated issues and we expect next year to see a focus on improvements in both.

• Change at the EPA? Lisa Jackson announced on December 27, 2012, that she’d be stepping down as head of the EPA early next year.

I’ve blogged before about Governor Snyder’s replacements for the Brownfield MBT, historic property tax and MEGA credit programs. Last August, the Michigan Economic Development Corporation (MEDC) announced that, effective October 1, 2011, those old programs were recast as the: (1) Michigan Business Development Program; and (2) the Michigan Community Revitalization Program. This was the Governor’s effort at focusing on “business gardening” – ostensibly

These programs are just now being rolled out – a delay of some 7 months. Thus far, not a single project has been approved (but to be fair, I’m not sure anyone has applied). The rigor that the Michigan Strategic Fund is going to put applicants through is severe. For example the return on the developer’s investment will be evaluated. Here is some of what they are looking for (as applicable) before funding grants or loans under the Community Revitalization Program:

1. Projects that revitalize regional urban areas get preference;

2. Only projects within a downtown or traditional commercial center and only projects that primarily promote the desired revitalization of urban areas;

3. The amount of local community and financial support for the project;

4. The applicant’s financial need for the incentive and whether the project is financially and economically sound;

5. The extent of contamination and reuse of vacant buildings and historical buildings and redevelopment of blighted property;

6. Whether the project increases area density and promotes mixed-use development and walkable communities;

7. Whether the project promotes sustainable development; and

8. Whether the project will compete with or affect existing Michigan businesses.

Despite the “no picking winners/losers” mantra – clearly this program has a specific focus and asks for much more than the old programs did. Some developers might not want their finances looked into this deeply This is different from the Business Development Program which last month approved 5 incentive packages for five business expansion projects. That Program is clearly focused on jobs and provides:

• No support for any retail projects;
• No support for any retention projects;
• Consideration given to out-of-state competition;
• Net-positive return to Michigan;
• Level of investment made by business;
• Shovel-ready projects with funding support;
• Business diversification;
• Re-use of existing facilities;
• Near-term job creation;
• Wage levels for those new jobs;
• Employer provided benefits;
• Strong links to Michigan suppliers; and
• Whether the project is in a distressed or targeted community.

There was a pot of $100 million for incentives, which can be grants of up to $1Million; or loans or other economic assistance of up to a total of $10 million per recipient.